Ideal Investment Ratio For the Investor Of Any Age Group

Ideal Investment Ratio

Investing needs proper planning. Whether one invests for long-term or short duration,  whether one invests in physical assets or financial assets, one can’t ignore the most  important tenet of Planning. 

So how do I plan the investments? What factors should one consider before making the first move for the investments? Is it only investible surplus that counts? Of course not! 

While money is the protagonist here, one needs to consider a slew of other factors, too  viz-a-viz age, risk-taking ability, financial goals, how soon one wants to achieve goals and  which investment channel one should choose. 

One may do everything right but seldom focus on two major factors – age and risk taking ability. Surely, age is just a number but that does not hold true in the case of  investments. Age does have a significant impact on one’s investments. 

The two factors of age and risk appetite are inversely related to each other. As one  grows the other decreases. For instance, if someone is in his/her 20s, the ability to  bear losses would be higher. Because there is a very less financial burden on the  investor. Thus, one may invest in relatively risky investment channels in order to earn  huge returns. Whereas a person in his/her 40s, who’s married and has a kid may invest  more in Bank FDs. Because these investments guarantee capped returns on the  investments. 

Refer to the below table to know how much of the investible surplus one should invest  in equities. 

Age 20s 30s 40s 50s 60s
Risk Appetite Very High High Medium Low Very Low
Risk Profile Very  AggressiveAggressive Moderately  AggressiveModerate Consevative
Equity 75% 60% 40% 30% 20%
Others 25% 40% 60% 70% 80%

Remember, the investible surplus may vary depending upon one’s earning capacity and  the future goals.

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